CERAWEEK-Electric users face rising bills despite cheaper fuel

Reuters Staff

4 Min Read

HOUSTON, March 7 (Reuters) - Electric power bills are likely to rise across the United States as utilities spend billions to replace aging infrastructure, add costly renewable resources and install pollution control devices to clean up older power plants, industry executives said on Thursday, the fourth day of the IHS CERAWeek energy conference in Houston.

Pressure on electric rates, which have been stable or falling in recent years, is building even as utilities increase the use of natural gas to generate electricity. Natural gas prices are near their lowest levels in a decade.

James Rogers, chief executive of Duke Energy, the nation’s largest utility, said asking regulators to raise rates can be hard to justify from the customers’ outlook, citing a recent rate increase sought by one Duke utility to cover new power plant construction.

“From a customer’s perspective, the lights are still the same,” said Rogers. “When they turn the TV on, it is still the same, yet the price of electricity is going to go up and they don’t see that the new plants are much cleaner and there’s an 18 percent reduction in our carbon dioxide emissions. They don’t see that impact.”

Anthony Earley, chief executive of PG&E Corp, said all energy companies must talk more about the need to invest in energy infrastructure for safety, reliability and as a way to create jobs.

“A lot of infrastructure is getting to the end of its useful life,” Earley said. “Given our experience with the San Bruno gas explosion, we are the poster child for making sure you invest in infrastructure. This is not optional.”

Eight people were killed in September 2010 when an aging, 30-inch natural gas pipeline owned by PG&E’s gas utility exploded in San Bruno, California, a San Francisco suburb, destroying 80 homes and leaving an 40-foot crater. The pipeline’s age was cited as a factor leading to the blast.

California utilities face the cost of meeting the mandate to supply 33 percent of the state’s electric supply in coming years from renewable resources, like wind and solar power, Earley said.

“Some of the early contracts were very expensive and those projects are just now coming online,” Earley said. PG&E’s renewable contracts will likely add 1 percent to 1.5 percent to utility bills, over and above the inflation rate.

Earley said some long-term contracts the utility signed for renewable resources were above $200 per megawatt-hour. Those projects are now being completed and costs for the power will begin showing up on customer bills.

“That’s going to create some issues for us,” Earley said.

State regulation of electric rates developed when electric demand was growing every year does not work in the current climate where demand is not rising - due to a stagnant economy - but monthly bills are, the executives said.

Utilities need rate policies that are not based on rising consumption by homes and businesses.

“Energy efficiency is the cheapest form of energy, but when you try to describe to customers that we make electricity, we distribute electricity and we try to sell them less, customers don’t understand,” said John Russell, president of CMS Energy Corp, a Michigan-based utility.